Business
BiDV: Award for outstanding bank in fields of risk management in Asia by Asia Risk
The Bank for Investment and Development of Vietnam (BIDV) has been awarded as “House of the Year Vietnam 2017” by the Asia Risk magazine, which recognise high achiever in fields of risk management and derivatives across Asia.
The award ceremony took place at the Marina Bay Sands, Sinagpore on September 26, with the participation of leading financial institutions in the world. Asia Risk is the only publication dedicated to meeting the information needs of risk management and derivatives professionals in the Asia-Pacific region. This year, the Asia risk 2017 award is to recognize best practice in providing services to banks and other financial institutions in relation to derivatives and risk management. As such, BIDV has shown clearly the strength of product innovation, underpinned by sound risk management strategies, which separates the bank from competitors. At the same time, BIDV has been highly regard in the fluency in hedging for end users as well as structuring.
Previously, the launch of equity futures trading on the Hanoi Stock Exchange on August 10 highlights the problems facing Vietnam’s derivatives industry. Regulatory caution had delayed the trading start date several times, and an initial product suite of VN30 and HNX30 equity index futures, as well as five-year bond futures, falls far short of the range of hedging instruments required by a rapidly industrialising Vietnam.
Set against this was the relatively benign macro-landscape over the last 12 months. Interest rates were stable and the Vietnamese dong remained steady against other currencies, despite the State Bank of Vietnam relaxing rules around the currency’s benchmark in early 2016. But this stability could soon change. Fears of a rise in inflation, and an impending change to the interest rate benchmark composition – talks are in place between the Vietnam Bond Market Association and the central bank over interest rate reforms – gave rise to the spectre of a near-term Vietnamese dong interest rate rise that firms couldn’t hedge, since no banks offered over-the-counter interest rate swaps.
On June 13 it completed a $13 million VND interest rate swap with a local financial firm, the first time an over-the-counter deal of this type had been conducted with a non-bank counterparty. It is for making this critical contribution to the development of Vietnam’s derivatives market that BIDV has won the House of the Year award. Until June corporates with Vietnamese dong liabilities had only been able to choose hedges denominated in euro, yen or US dollar and linked to standardised indexes such as Libor and Euribor, instead of the local benchmark for corporate loans of the trailing 12-month deposit rate. Firms were left with the unpalatable choice of a potentially huge basis risk or just leaving their local currency exposures unhedged.
And these exposures are significant. According to data from BIDV, the total value of dong-denominated deposits and loans in 2017 totalled 11.5 trillion dong ($505 million) – equal to 90% of the country’s total bank deposits. The main interest rate benchmark is linked to the trailing 12-month deposit rate of the four state-owned commercial banks – VCB, BIDV, VietinBank and AgriBank – which has remained stable at between 6–7% over the last two years, but is expected to become more volatile in the near future.
As such BIDV has pioneered the creation of a local currency interest rate swap market, one of the fundamental stages in developing the full range of risk management tools needed by firms as economies develop.
Along with BIDV, Asia Risk has awarded prizes for other leading financial institutions, such as Credit Suise Bank (Switzerland) with Quant House of the Year - the most innovative and efficient quantitative solution; Standard Chartered Bank (England) with Currency Derivatives House of the Year – the best currency derivative product; Siciete Generale (France) with Credit derivatives House of the Year – the best credit derivative product. Besides, in information & technology field, the Technology development of the year was awarded for famous software developing company Fenics – the best financial technology, and FIS with the Technology provider of the year – providing the best technology service in finance.
Representatives of BIDV received the Award.
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Set against this was the relatively benign macro-landscape over the last 12 months. Interest rates were stable and the Vietnamese dong remained steady against other currencies, despite the State Bank of Vietnam relaxing rules around the currency’s benchmark in early 2016. But this stability could soon change. Fears of a rise in inflation, and an impending change to the interest rate benchmark composition – talks are in place between the Vietnam Bond Market Association and the central bank over interest rate reforms – gave rise to the spectre of a near-term Vietnamese dong interest rate rise that firms couldn’t hedge, since no banks offered over-the-counter interest rate swaps.
On June 13 it completed a $13 million VND interest rate swap with a local financial firm, the first time an over-the-counter deal of this type had been conducted with a non-bank counterparty. It is for making this critical contribution to the development of Vietnam’s derivatives market that BIDV has won the House of the Year award. Until June corporates with Vietnamese dong liabilities had only been able to choose hedges denominated in euro, yen or US dollar and linked to standardised indexes such as Libor and Euribor, instead of the local benchmark for corporate loans of the trailing 12-month deposit rate. Firms were left with the unpalatable choice of a potentially huge basis risk or just leaving their local currency exposures unhedged.
And these exposures are significant. According to data from BIDV, the total value of dong-denominated deposits and loans in 2017 totalled 11.5 trillion dong ($505 million) – equal to 90% of the country’s total bank deposits. The main interest rate benchmark is linked to the trailing 12-month deposit rate of the four state-owned commercial banks – VCB, BIDV, VietinBank and AgriBank – which has remained stable at between 6–7% over the last two years, but is expected to become more volatile in the near future.
As such BIDV has pioneered the creation of a local currency interest rate swap market, one of the fundamental stages in developing the full range of risk management tools needed by firms as economies develop.
Along with BIDV, Asia Risk has awarded prizes for other leading financial institutions, such as Credit Suise Bank (Switzerland) with Quant House of the Year - the most innovative and efficient quantitative solution; Standard Chartered Bank (England) with Currency Derivatives House of the Year – the best currency derivative product; Siciete Generale (France) with Credit derivatives House of the Year – the best credit derivative product. Besides, in information & technology field, the Technology development of the year was awarded for famous software developing company Fenics – the best financial technology, and FIS with the Technology provider of the year – providing the best technology service in finance.
